Profit From Shadow Inventory In 5 States

When you know the best pockets or market areas around the U.S. to find discounted real estate, you are half way home. All that is left is evaluating the inventory for maximum profit. For those of you connected to REIAComps , the control and feeling of confidence you have over your deals is priceless. Using REIAComps to investigate the value of “Shadow Inventory” houses as they come to market, against the recent sold comparables, will provide you a solid position to “make your profit when you buy”.

First, let’s define “Shadow Inventory”. The general definition goes like this; the current stock of properties in the shadow inventory, also known as pending supply, by calculating the number of properties that are seriously delinquent, in foreclosure or held as REO by mortgage servicers, but not currently listed on multiple listing services MLS’s.

CoreLogic released its November National Foreclosure Report with a supplement featuring quarterly shadow inventory data as of October 2013. According to CoreLogic analysis there were 46,000 completed foreclosures in the United States in November 2013, down from 64,000 in November 2012, a year-over-year decrease of 29 percent. On a month-over-month basis, completed foreclosures decreased 8.3 percent, from 50,000 in October 2013.

To make it plain, and according to CoreLogic, completed foreclosures are an indication of the total number of homes actually lost to foreclosure. As a basis of comparison to the 46,000 completed foreclosures reported for November 2013, completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006 before the decline in the housing market in 2007. Since the financial crisis began in September 2008, there have been approximately 4.7 million completed foreclosures across the country. Thus, while this data is old news to most, those tied into REIAComps easily adjusted to valuation changes resulting from the financial crisis in real time.

Now down to the those markets where you can make real profit, five states with the highest number of completed foreclosures for the 12 months ending in November 2013 are Florida (115,000), Michigan (54,000), California (42,000), Texas (40,000) and Georgia (36,000). These five states account for almost half of all completed foreclosures nationally. Anyone looking to acquire discounted houses to wholesale or renovate you can’t go wrong in these market areas.

Additionally, the five states with the highest foreclosure inventory as a percentage of all mortgaged homes as of November 2013 were Florida (6.6 percent), New Jersey (6.5 percent), New York (4.7 percent), Maine (3.5 percent) and Connecticut (3.5 percent). Use these five states to bolster your investing activity.

Take this priceless info regarding discounted “Shadow Inventory” real estate which will come to market and turn some extra profit. Of course, use REIAComps to determine the best acquisition and ARV for every deal you look at. Don’t for one moment let someone tell you the value. Let REIAComps show you for yourself.

Source data: CoreLogic & NMPM

Mark Jackson is an appraiser, real estate investor and property valuation specialist who teaches others to get more out of their real estate investing business. In 1999, Mark founded an appraisal company and soon found his true gift was analyzing property values for real estate investors. Since 2000, has closed millions of dollars’ worth of his own domestic and international real estate transactions. Mark’s passions are: faith, family, golf and real estate.